More investors need to think longer term when it comes to building their Tax-Free Savings Account (TFSA) portfolios. Undoubtedly, young people can get excited about betting on a hot new trend or asset class. Cryptocurrencies were all the rage just over a year ago. Nowadays, you don’t hear as much about white-hot digital tokens. The hype faded in quite a hurry. As new trends emerge, you can expect hype will fluctuate, just as it did during the early days of the internet bubble.
These days, it seems like everyone wants a piece of artificial intelligence (AI) and the benefits it can provide. I think the trend could bring forth big change. Still, there’s also danger in overestimating the potential of a technology. Place a bet on the wrong AI stock, and you can still lose money, even if AI delivers on all of its promises.
Just because the internet bubble burst in 2000 didn’t mean the internet failed to deliver. It just took time. And many impatient investors (or should I say, speculators?) simply did not have the time horizon to see their bets pay off. Further, they placed bets on many of the wrong companies, some of which had zero in the way of profits or even business models!
You see, building wealth is more about spotting trends and investing in them. Beating the stock market isn’t as simple as betting on a tech-focused thematic exchange-traded fund. Sorry, Cathie Wood!
Low-tech growth could hold considerable value
In this piece, we’ll look at one low-tech growth stock to build wealth over the decades. At today’s valuations, I view the name as one of the GARP (growth at a reasonable price) stocks. Of course, you should always prefer GARP over “growth at any price.”
At the end of the day, the worst company on the TSX Index can be a decent investment if you pay a price below intrinsic value. The reverse is also true: overpay for the hottest firm, and you could still be in for painful losses!
I’m not trying to scare you away from tech. I still think it’s a critical sector for any portfolio. That said, I believe many investors, especially market newcomers, are neglecting the lower-tech firms with strong, predictable cash flow streams and modest price tags. This piece will check out two such names.
Aritzia
Aritzia (TSX:ATZ) is one of the recently fallen TSX stocks that’s very intriguing on any dips, especially those tied to the macroeconomic outlook. Retail woes and recession have already worked their way into the stock, in my opinion. Investors should ask themselves what the next act will be.
As the company continues to invest in growth, its margins will be in for a bit of a hit. At the end of the day, you need to invest to grow. As rates rise, investors could continue to sour on the name. However, I believe the firm has a pathway toward profitable growth.
The next 10 months will probably be tough sledding. But the next 10 years and beyond, I believe, are very bright, as Aritzia expands its impressive brand to new markets. Ultimately, I think Artizia will be successful, as it does everything in its power to take its brand to the next level.
